Global Financial Market
Chapter 6
Discussion Questions
|6-1. |Explain how rapidly expanding sales can drain the cash resources of a firm. |
| | |
| |Rapidly expanding sales will require a buildup in assets to support the growth. In particular, more and more of the |
| |increase in current assets will be permanent in nature. A non-liquidating aggregate stock of current assets will be |
| |necessary to allow for floor displays, multiple items for selection, and other purposes. All of these “asset” |
| |investments can drain the cash resources of the firm. |
| | |
|6-2. |Discuss the relative volatility of short- and long-term interest rates. |
| | |
| |Figure 6-10 shows the long-run view of short- and long-term interest rates. Normally, short-term rates are much more |
| |volatile than long-term rates. |
| | |
|6-3. |What is the significance to working capital management of matching sales and production? |
| |
Discussion Questions
|6-1. |Explain how rapidly expanding sales can drain the cash resources of a firm. |
| | |
| |Rapidly expanding sales will require a buildup in assets to support the growth. In particular, more and more of the |
| |increase in current assets will be permanent in nature. A non-liquidating aggregate stock of current assets will be |
| |necessary to allow for floor displays, multiple items for selection, and other purposes. All of these “asset” |
| |investments can drain the cash resources of the firm. |
| | |
|6-2. |Discuss the relative volatility of short- and long-term interest rates. |
| | |
| |Figure 6-10 shows the long-run view of short- and long-term interest rates. Normally, short-term rates are much more |
| |volatile than long-term rates. |
| | |
|6-3. |What is the significance to working capital management of matching sales and production? |
| |